What is IRS Section 871(m) and why might it cause my order to be rejected?

IRS Section 871(m) is a part of the US Internal Revenue Code that can impact certain financial transactions, potentially leading to order rejections. Here is what you need to know:

1. Purpose of Section 871(m):
   • It aims to harmonize the US tax treatment for non-US persons regarding:
     1. Dividends on US stocks
     2. Dividend equivalent payments on derivative contracts that closely replicate US stock ownership
2. Withholding Tax:
   • The regulation focuses on withholding tax on dividend equivalent payments for certain equity derivatives.
3. Order Rejections:
   • Your order may be rejected if it has potential implications under Section 871(m).
   • This is done to ensure compliance with US tax regulations.
4. Affected Instruments:
   • Primarily impacts derivative contracts that closely replicate ownership of US stocks.
5. Who is Affected:
   • Mainly applies to non-US persons trading in these specific types of derivatives.

If your order was rejected citing 871(m) as the reason, it is likely because the transaction fell under the scope of this regulation. To avoid future rejections, you may want to consult with a tax professional for more specific guidance on your particular situation and the types of trades that might be affected by this regulation.

Note

• Interactive Brokers does not provide tax advice, does not make representations regarding the particular tax consequences of any investments, and cannot assist clients with tax filings. Investors should consult with their tax professional about the tax implications of any investment.